Reefer Madness? Did Colorado Just Criminalize Independent Contractor Misclassification?

Colorado independent contractor misclassification wage theft law 2019

The state that brought us legalized recreational marijuana and local decriminalization of psychedelic mushrooms may be a bigger buzzkill than we thought — at least for businesses using independent contractors.

A new Colorado law reclassifies the failure to pay wages as theft, which sounds pretty chill; but the way the law is written, it could have the effect of making independent contractor misclassification a crime.

Failing to pay wages under Colorado law includes failing to pay a minimum wage or overtime. When independent contractors sue and allege they were really employees, one of the most common claims asserted is that, since they were really employees, they were entitled to a minimum wage and overtime pay. In these lawsuits, contractors often allege they worked enough hours that they should have been paid overtime. Colorado overtime law requires employees to be paid overtime not only after working 40 hours in a workweek, but also after working more than 12 hours in a workday or 12 consecutive hours over two days.

It is unclear whether the new law was intended to criminalize independent contractor misclassification, but it may have that effect. On the other hand, Colorado businesses may be able to an assert a good faith defense, arguing that the new criminalization law is intended only to cover willful acts of failure to pay, not legitimate disputes over whether someone is legitimately classified as an independent contractor.

It remains to be seen how things play out, but when Colorado businesses get an occasional break from making sure their laborers aren’t high, it might be a good idea to double check independent contractor relationships to make sure they can withstand a legal challenge.

© 2019 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

Does your business need training on avoiding independent contractor misclassification claims? I do that!

Enter your email address to follow this blog and receive notifications of new posts by email.

2018_Web100Badge

 

After Robert R Died, the State Agency Kept Sending Him Assessments. Then I Did This…

Graveyard independent contrractor misclassificationThis is a true story — and it was the most fun I ever had as a lawyer.

I was representing the administrator of an estate. The deceased, Robert R, had required round-the-clock care before his demise, and his family retained several home heath care nurses. The family treated them as independent contractors. When one nurse was no longer needed, she filed for unemployment.

The state agency decided she was an employee, not a contractor. The agency sent a bill to the family for not paying into the state unemployment fund. The assessments covered all of Robert R’s nurses, not just the one who filed for unemployment. The agency also assumed that Robert R continued to retain nurses, and it issued new assessments each quarter.

But then Robert R died. At that point, he no longer needed nurses.

That’s where I come in. Shortly after Robert R’s death, I wrote a polite letter to the agency, informing it that Robert R had passed. I attached the death certificate and told the agency there were no more nurses, so please do not send any new assessments.

But the next quarter, the state agency sent a new quarterly assessment.

I sent another letter. I attached a second copy of the death certificate and again informed the agency that Robert R had died and no longer had any nurses, so please stop sending new assessments.

The next quarter, the state agency sent another new quarterly assessment.

Exasperated, I then sent this.

THL letter - why we are not paying these assessments

The agency stopped sending assessments, and I never heard from them again.

© 2019 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

Need training on avoiding independent contractor misclassification claims? Hey, I do that!  

Enter your email address to follow this blog and receive notifications of new posts by email.

2018_Web100Badge

 

A New Low for California’s Independent Contractors? ABC Test May Be Adopted for the Whole Labor Code

Death valley for independent contractors - california dynamexCalifornia is the home of both the highest and the lowest points in the continental U.S. — Mt. Whitney at 14,495 feet and Death Valley at -282 feet. As far apart as these two sites are on the altimeter, they’re less than 100 miles apart on the odometer.

That’s a lot of up and down. If you follow California’s developing law on Independent Contractor vs. Employee tests, you’ve also seen a lot of ups and downs recently. If a pending bill passes (as expected), businesses using independent contractors may be about to experience a new low.

Remember the Dynamex case? As explained here, that’s the California Supreme Court decision that enacted a strict ABC Test for determining whether someone is an employee or an independent contractor under California’s wage orders. As we discussed here, though, the ABC Test only applies to certain state law employment claims. Other less stringent tests still apply when analyzing whether a contractor should really be considered an employee under other state employment laws.

But that may be about to change.

Assembly Bill 5 would adopt the Dynamex ABC Test as the way to determine whether someone is an employee under all parts of the California Labor Code and under state unemployment law.

In its current form, the law would exempt certain licensed professions from being subject to the ABC Test. Extensive lobbying efforts are underway by various trade associations to carve other trades out of the law as well. For those professions excluded from the law’s reach, the test for determining whether a contractor is really an employee would be the S.G. Borello balancing test, a much less stringent standard than the Dynamex ABC Test.

The bill is now pending before the state senate. If it passes, it will become even harder to be a legitimate independent contractor in California. The state with one of North America’s highest peaks will become a virtual Death Valley for contractors trying to maintain their independent status.

We’ll continue to follow the status of this bill.

© 2019 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

Enter your email address to follow this blog and receive notifications of new posts by email.

2018_Web100Badge

 

Fun with Funerals? Cremation Company Settles Misclassification Case for $2.5 Million

Cannon cremation funeral Independent contractor misclassificationEveryone loves a fun funeral story, right? Apparently so. AARP.com posted this article about creative cremations. Available options for ashes include:

  • Being blasted out of a cannon to the tune of “Mr. Tambourine Man,” (Thank you, Hunter S. Thompson);
  • Being placed in an “environmentally safe, ball-shaped concrete memorial reef” and placed in the ocean to create a marine habitat, (giving a new and more literal meaning to “sleeps with the fishes”);
  • Being launched into space for an earth orbit; and
  • My personal favorite – being loaded into a five-foot biodegradable helium balloon and launched over the hills surrounding the deceased owner’s ranch so his buddies could shoot at the balloon until it burst, spreading the ashes over the surrounding foothills (so beautiful it almost makes me want to weep in my moonshine).

A cremation company had a less fun time last month, when a judge approved a $2.5 million settlement for independent contractor misclassification. The settlement included $1.65 million to a class of independent sales representatives and $825,000 in attorneys’ fees to the plaintiffs’ lawyers.

The company’s independent sales representatives had claimed that they were really employees, despite having signed an Independent Contractor Agreement in which they agreed they were contractors.

As we’ve noted many times before, though, it’s the facts of the relationship that matter, not what the parties call themselves. According to the plaintiffs, the cremation company told them when to work and where to work, paid them an hourly non-negotiable rate, required frequent reports, supervised their work, and provided them a handbook instructing them how to conduct themselves and how to perform their work. These are all facts that weigh in favor of employment status.

The sales reps’ lawsuit alleged that, when assessing the facts of the relationship, they were really employees and not independent contractors. They alleged violations of several laws that apply only to employees, including violations of California’s overtime, meal and rest break, waiting time, recordkeeping, and business expense reimbursement laws; and violations of the federal FLSA overtime rules.

The parties settled the dispute, and a federal judge approved the settlement.

There’s nothing suprising here, but the settlement should remind us that:

  • The facts of the relationship are what matter, even if the parties agree to call the workers “independent contractors” and they sign an Independent Contractor Agreement;
  • Different tests apply to different laws; here, there were claims that would have to be evaluated under:
  • Independent contractor misclassification remains a real and potentially costly risk.

The settlement did not say whether any of these sales representatives sold cannon, reef, space, or skeet shooting funerals along with cremation services. But I sure hope they did.

© 2019 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

Enter your email address to follow this blog and receive notifications of new posts by email.

2018_Web100Badge

 

New ABC Test Under Federal Labor Law? Dem-Sponsored Bill Would Make That Change

Independent contractor misclassification NLRB peacock

All eyes on me!

According to The Atlantic, when a peacock spreads and shakes its elaborate feathers, it shakes them at 26 times a second, which creates a pressure wave that is sensed by a female peahen through the crest atop her head. This precise frequency causes the female’s crest to vibrate in a way that is apparently very sexy for peafowl. The male seeks attention and, with just the right vibrations, he lets all the single pea-ladies know that he wants some action. Note to pea-fellas: If you like it, then you shoulda put a ring on it.

In a crowded field of Democratic Presidential hopefuls, something similar is happening, but it’s less pretty, less sexy, and less appealing for businesses across the country.

As Democratic legislators vie for union support in the upcoming 2020 election, they’re making sure to signal to workers and unions that they’ve got pretty feathers and they’re not afraid to use them. A new bill co-sponsored by Presidential hopefuls Kamala Harris (Calif.), Bernie Sanders (Vt.), Elizabeth Warren (Mass.), Cory Booker (N.J.), Kirsten Gillibrand (N.Y.), Amy Klobuchar (Minn.), and Rep. Tim Ryan (Ohio) would amend the National Labor Relations Act (NLRA) to redefine “employee” and “joint employment.”

The Protecting the Right to Organize Act of 2019 would impose a strict Dynamex-style ABC Test for determining Who Is My Employee? under the NLRA. A worker would be deemed an employee under the NLRA by default and could only be deemed an independent contractor if all three of the following could be proven:

(A) the worker is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact, and
(B) the worker performs work that is outside the usual course of the hiring entity’s business, and
(C) the worker is customarily engaged in an independently established trade, occupation, or business.

This is the same strict ABC Test adopted by the California Supreme Court in Dynamex and by the Massachusetts legislature for its state wage and hour claims.

The Act would also redefine joint employment. It would require that an entity be deemed a joint employer under the NLRA if it “codetermines or shares control over the employee’s essential terms and conditions of employment.” So far, so good. But then there’s this: “In determining whether such control exists, the Board or a court of competent jurisdiction shall consider as relevant direct control and indirect control over such terms and conditions, reserved authority to control such terms and conditions, and control over such terms and conditions exercised by a person in fact.”

The Act would stymie the NLRB’s current effort at passing a new regulation that would limit “joint employment” to situations where actual control is exerted (not merely reserved) and where that control is exerted over essential terms and conditions of employment, such as hiring, firing, and pay.

Most damaging of all (but not related to independent contractor or joint employment issues), the bill would fundamentally change the collective bargaining process by imposing binding arbitration on the parties to resolve any disputes in contract negotiation. That change, if it were ever adopted, would change the nature of bargaining as we know it, potentially removing much of the incentive for unions to bargain in good faith.

If the Act emerges from committee, it will likely pass the House but has no chance of success in the Senate. Even if it passed, it would almost certainly be vetoed by Trump anyway.

For now, the Act is a political move intended by the Democratic Presidential hopefuls to demonstrate their pro-worker, pro-union credentials. For a certain audience, the Act looks pretty and may vibrate some crests. But for at least the next two years, this display of feathers is not likely to lead to any action.

Bonus feature: For another peacock-related post, click here.

© 2019 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

Enter your email address to follow this blog and receive notifications of new posts by email.

2018_Web100Badge 

Say It Like You Mean It! NLRB Says Uber Drivers are Independent Contractors

All You can Eat Seats - Independent contractor misclassification

Section 223 looks delicious!

I was in Phoenix last week and saw this sign at a Diamondbacks Game. The seats in Section 223 were probably plastic and hard to chew but otherwise looked pretty tasty. Still, I don’t think I could eat more than a few at a time.

Ok, I know what the sign intended, but my reading is a fair one too. Right? The message wasn’t quite clear.

The NLRB was much more clear in the message it sent last week in an Advice Memorandum from the Office of the General Counsel. The Board opined that UberX and UberBLACK drivers were independent contractors, not employees of the ride-share app.

The opinion letter applies only to federal labor law (the NLRA), not to wage and hour law, employee benefits law, tax law, or the vast potpourri of state laws, but it’s another sign that the current administration is intent on protecting independent contractor relationships — if the relationships are properly structured.

The memo applied the same Right to Control Test for determining Independent Contractor vs. Employee that the Board used in January in its SuperShuttle decision. In SuperShuttle, the Board ruled that a group of airport van drivers were independent contractors, not employees, under the National Labor Relations Act. The ten-factor Right to Control Test used by the Board is explained here.

This NLRB Advice Memorandum arrives less than three weeks after a similar opinion letter from the Department of Labor (DOL). The DOL’s April 29 letter concluded that service providers who use “virtual marketplace” apps to find customers are independent contractors, not employees. While the letter doesn’t identify the app it reviewed, the DOL’s analysis seems to apply to Uber and other ride-share apps and to the service providers (drivers) who use these apps to find customers. The DOL’s letter addressed only the Fair Labor Standards Act (FLSA), which applies a six-factor Economic Realities Test for determining Independent Contractor vs. Employee. Different law, different test. 

Here are four takeaways from the two letters, viewed together:

  1. Different tests apply to different laws, even for similar circumstances. That’s been a consistent theme in this blog, and these two letters — one interpreting the NLRA and the other interpreting the FLSA — reinforce the different approaches. Click here for a chart showing the different tests for Independent Contractor vs. Employee, as of January 2019.
  2. The current administration and its executive agencies are much friendlier toward independent contractor relationships than their Obama-era predecessors. The Obama DOL and NLRB were outright hostile toward independent contractor relationships (see examples here for DOL and here for NLRB), so this is a major change.
  3. These are not court decisions and do not bind the federal courts, even as to NLRA and FLSA cases.
  4. These opinions apply only to the NLRA and the FLSA — two of the many federal laws that apply only to employees, not independent contractors. The opinions do not directly impact federal tax law or employee benefits law, and they do not impact any of the myriad state laws. In other words, the states don’t care.

The area of independent contractor misclassification and the never-ending quest to determine Who Is My Employee? continues to evolve at a pace that should keep readers on the edge of their seats. Just don’t sit too close to the edge, because if you abandon your seat, someone at a D-Backs game might try to eat it.

© 2019 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

Enter your email address to follow this blog and receive notifications of new posts by email.

2018_Web100Badge

 

Which Claims Are Covered by the Dynamex ABC Test? Here’s a Chart for California. (Time to Give Up on Positive Thinking?)

Chart Dynamex which claims does the ABC Test cover in California

Cook before eating?

A Mongolian couple died from the bubonic plague earlier this month after eating raw marmot meat. An official from the World Health Organization told the BBC that the couple ate the rodent because they believed it would bring them good health. It didn’t.

Positive thinking can be powerful, but not as powerful as bubonic plague.

California businesses that use independent contractors should be similarly cautious about any positive thinking. After a series of court decisions and a new opinion letter from the California Labor Commissioner, use of the Dynamex ABC Test for determining Independent Contractor vs. Employee is expanding.

Which claims now use the Dynamex test for determining Independent Contractor vs. Employee? Here’s the latest list — at least according to the California Labor Commissioner and my reading of recent court decisions:

Dynamex ABC Test applies:

  • Overtime;
  • Minimum wage;
  • Reporting time pay;
  • Record keeping (including itemized pay stub obligations);
  • Business expense reimbursement for cash shortages, breakage, or loss of equipment;
  • Business expense reimbursement for required uniforms, tools, and equipment; and
  • Meal and rest periods.

It depends:

To determine Independent Contractor vs. Employee for these claims, the Labor Commissioner and a California Court of Appeal instruct that the Dynamex ABC Test applies if the claim is focused on enforcing payment of minimum wage, overtime, and other obligations set forth in the Wage Orders. If not, then the ABC Test does not apply.

The general rule, according to the opinion letter, is that the Dynamex ABC Test applies to any claims that seek to enforce obligations described in one of the Industrial Wage Orders

The opinion letter does not carry the weight that a court decision does, and it makes some assumptions that the California Supreme Court did not make when it adopted the ABC Test in Dynamex. So there’s always a chance that the California Supreme Court might rule that the scope of the Dynamex test is supposed to be limited to a narrower range of claims. But this is California, so that does not seem likely. In other words, don’t sample that marmot meat.

Dynamex does not apply (we think):

  • Workers’ compensation claims;
  • Unemployment claims;
  • Wrongful termination;
  • Discrimination, harassment, or retaliation;
  • Tax obligations; and
  • Employee benefit obligations.

For these claims, either the S.G. Borello balancing test should apply if the claims are asserted under California law. For tax and employee benefit claims asserted under federal law, the Right to Control Test will apply. Read more here to understand how one California Court of Appeals determined which test applies to which claim. (Including entirely unnecessary references to G-L-O-R-I-A Gloooooria!)

One of the reasons independent contractor misclassification claims can be so challenging to defend is because different tests apply to different claims. This is not just a California problem.

The same problem exists under federal law, with one test applying to federal wage and hour claims (FLSA), another test applying to tax, benefits, and discrimination claims, and a moving target as to which test applies under federal labor law (NLRA).

Here is a similar chart, showing which test applies to which federal law claims.

In California, it’s getting harder and harder to prove independent contractor status, especially for claims applying the Dynamex ABC Test. Many Californians are into zen, meditation, and positive thinking, but the power of positive thinking might not get you too far when it comes to trying to preserve independent contractor status. There are still defenses, and it’s still possible to maintain independent contractor status in California, but it’s not easy.

Fighting misclassification claims in California can sometimes feel like eating raw marmot meat. It might seem like a good idea at first, but then you could end up with bubonic plague.

© 2019 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

Enter your email address to follow this blog and receive notifications of new posts by email.

2018_Web100Badge